Pages

Monday, February 6, 2012

Study: Robotic surgery financials explained

I thought I had seen the worst of robotic surgery research but the January 2012 issue of Surgery News, billed as “The Official Newspaper of the American College of Surgeons,” contains an article about a paper that surpasses all the rest. It can be found on page 17 here.

The paper was presented at the annual meeting of the American Association of Gynecologic Laparoscopists by a group from the Florida Hospital in Orlando.

The headline, “Robotic Hysterectomy Cuts Blood Loss in Obese,” is certainly catchy. Let’s look deeper. The study was a retrospective comparison of 111 patients who had robotic hysterectomy to 152 who had standard laparoscopic hysterectomy. All women had BMIs greater than 30. The robotic group had an average estimated blood loss of 85 cc versus 210 cc in the laparoscopic group. Sounds good, right? However, the difference in blood loss of only 125 cc [about 1/4 of a unit of blood] is hardly clinically significant. This was confirmed by the study’s own data. Average postop hemoglobin levels were 13.1 g/dL and 12.5 g/dL respectively.

There were also fewer conversions to open surgery in the robotic group. Duration of both types of operation was similar but does not take into account the lengthy set-up time, often as long as one hour, that robotic surgery entails.

The problem with any retrospective study is that confounding factors may not have been accounted for. It is likely that the women chosen for the robotic surgery were highly selected for suitability. We know nothing about either group’s co-morbidities, previous operations, uterine pathologies [e.g., cancer or not] or other possible factors influencing outcomes.

Here is the most interesting part of the report. The lead author said, “The robotic hysterectomy does … offer lower rates of conversion to laparotomy but does cause higher facility and total charges, as well as higher reimbursement rates.” The mean total hospital charge for robotic hysterectomy was $44,700 versus $25,557, a statistically significant difference. The average charge for the robotic instruments was $8,322 compared to $3,762 for standard laparoscopy equipment, also a significant difference. In response to a question about why there was such a disparity, the lead author said: “The charges are likely to recoup the cost of the robot purchase. We have multiple robots … four at our main institution and several others at other sites.”

The reimbursement actually received for robotic hysterectomy was $19,000 and for standard laparoscopic, a mere $$8,000.

I congratulate the authors for their candor [though no doubt inadvertent] in sharing the financial data and the reasons why robotic surgery is more costly. I am gobsmacked* at the differential in charges and reimbursement for the two types of hysterectomy and that the secret would be so openly shared.

I guess someone has to help the hospital “recoup the cost of the robot purchase.” But I wonder why third party payers are shelling out almost two-and-a half times more money for a procedure that has not been proven more effective than standard laparoscopic surgery?

50 comments:

Your article has merit, but I am not sure where you got the information about reimbursement. Until recently, there was no robotic code to even use for billing. Using the code pretty much results in no increase in payment vs the laparoscopic code. THE HOSPITAL EATS THE DIFFERENTIAL, not the payors. As to the merits of robotic surgery, that is a totally different argument. The number one issue is experience. The robot is a tool, which in the RIGHT hands, can do much better for the patient, especially with complicated procedures. Measuring the delta can be difficult in studies such as the one above. Also, most of these surgeons probably have done 100x more conventional procedures than robotic. I would ask you to find 5 experienced robotic surgeons who would allow someone to perform an open prostatectomy on themselves. No way. Again experience trumps most, but the robot in EXPERIENCED hands trumps all.

I got the information about reimbursement from the article I cited. The link is at the end of the first paragraph (click on the word "here" in that paragraph) and go to page 17 of the pdf. If you have trouble with that, cut and paste this link http://www.facs.org/surgerynews/2012/sn0112.pdf into your browser. Please read it.

You say "The robot is a tool, which in the RIGHT hands, can do much better for the patient, especially with complicated procedures." Please show me the data.

You hit the nail on the head with this post. I was actually just researching this issue and below is an e-mail I sent to a colleague last week. Basically this charge inflation that the robot drives costs the system a signifcant amount of money. And as the robot moves to more marginal procedures with no evidence/benefit to patient (ex. cholecystectomies that are already done laparoscopically), this is going to become a larger issue. It's a perfect example of all that is wrong with the US healthcare system. Here is an excerpt from my email:

I went back today and read through all the Medicare Inpatient Rules since ’04 (when the robot started to proliferate), to try to understand the kind of rate inflation caused by robot-driven charge inflation. The results are amazing. As a quick reminder, inpatient procedure reimbursement is driven by i) base rate increases and ii) DRG weight re-calibration. The DRG weight re-calibration has to be budget neutral, so if you increase the weight on one procedure, you have to have a corresponding decrease in the DRG weight(s) of other procedure(s). So by looking at the move in DRG weights over time, you can get a sense of how reimbursement increases/decreases relative to normal inpatient inflation.

Below are the results for prostate and benign hysterectomy, as well as a few other procedures for reference. As the robot continues to expand to more marginal procedures, charge and rate inflation will inevitably follow.

Prostatectomy (DRG 708):-’04 DRG Weight = 1.083-’12 DRG Weight = 1.273-Change in Weight = +18%-So since ’04 prostatectomy reimbursement has increased +18% faster than normal inpatient inflation-And this while prostatectomy LOS has gone from 3.0 days to 1.8 days = 40% reduction in LOS-So the healthcare system is incurring significantly higher costs for a procedure that shortens LOS-When a cardio procedure moves to outpatient and requires less facility utilization, reimbursement comes down significantly (drug-eluting stent outpatient reimbursement 35% lower than inpatient)-It makes no sense-And this ignores the excessive utilization that the robot has caused (12.5k cases in ’04 to peak 18.5k cases in ’09 -http://www.nejm.org/doi/full/10.1056/NEJMp1006602 )

Benign Hysterectomy (DRG 743):-’04 DRG Weight = 0.8099-’12 DRG Weight = 0.9306-Change in Weight = +15%-And as a reminder the robot has only penetrated ~30% of cases, so this weight inflation should even accelerate going forward as adoption accelerates-LOS has gone from 2.6 days to 2.0 days = 23% reduction-Again, the system is paying significantly more for a shorter stay procedure

Defibrillators (DRG 227):-’04 DRG Weight = 5.336-’12 DRG Weight = 5.15-Change in Weight = -3%-And this decline in weight is significantly understated because it ignores the rate deflation driven by move of ICD procedures from inpatient to outpatient that not captured in this data (55% of ICDs are now outpatient)

And just to make sure my last post was clear I wanted to add a couple more points. Hospital charges determine future DRG rates/Medicare reimbursement. Commercial insurers index their payments off Medicare DRGs, so if Medicare rates are being inflated by high robot-driven charges, commercial insurer reimbursement is going to increase as well. So the entire healthcare system is subsidizing the $1.5M purchase of robots that have no proven patient benefit.

I'm not saying insurers pay higher rates for robotic procedures, they don't. It is clearly stated in Intuitive Surgical's reimbursement guidance (http://www.intuitivesurgical.com/support/871971_Rev_E_Coding_Reimbursement_Sell_Sheet.pdf) and based on numerous conversations I've had with administrators at leading academic institutions. This Florida Hospital study seems very fishy to me. Is Intuitive Surgical encouraging some sort of coding shenanigans that less reputable institutions are taking advantage of? This is probably worth some more research.

The point I'm trying to make is that the proliferation of the robot indirectly leads to significant cost/reimbursement inflation for all procedure segments in which it is used (mostly prostatectomy and hysterectomy to date). Here is the chain of events. Hospital charges are higher for robotic procedures ($44,700 versus $25,557 for example in your post above) because they include significant depreciation for the $1.5M cost of the robot. These charges aren’t what actual insurers pay, but those charges are used by Medicare to set future DRG payment rates. So the charge-inflation caused by the robot indirectly leads to higher future Medicare DRG payments (as illustrated by the significant increase in the DRG weights in my post above). Commercial insurance companies index their payments off of the Medicare DRG, so Medicare inflation causes commercial insurers to pay more as well. And to be clear this inflation happens for all procedures that are captured in that DRG, including robotic and non-robotic procedures.

Since the change in DRG weights has to be budget neutral each year, by significantly increasing the reimbursement rates in areas of high robotic adoption (prostatectomy and hysterectomy), Medicare is also implicitly reducing payments for procedures that may be more data/outcomes-driven.

So basically the entire system is subsidizing hospitals to purchase $1.5M robots with limited data/patient outcome benefits. And this issue becomes more and more troubling as use of the robot increases in more marginal areas with absolutely no proven patient benefit. One could maybe argue that the significant inflation in prostatectomy rates can be justified by the patient benefits (shorter LOS, better outcomes, though not relative to expectations - http://www.jurology.com/article/S0022-5347(11)05458-9/abstract). But as the robot is used in increasingly marginal cases such as cystectomy, charge and reimbursement inflation will follow in this area as well. Can we really justify this reimbursement inflation with better patient outcomes in areas such as cystectomy that are already done laparoscopically with great outcomes?

Sorry for the long explanation, but this is a very complex situation that is not well understood. I’m all for the healthcare system paying more and subsidizing the development and proliferation of technology that has proven patient outcome benefits. Unfortunately, I don’t think that’s the case here.

In the past year I happen to have seen five different general surgical office consults who have had robotic prostate surgery within the past two years. Out of interest I questioned them all carefully about their pre and post surgical sexual performance. Surprisingly all five are essentially completely impotent after the surgery. What then is the great advantage of robotic prostate surgery?

Anon, Sorry for the delay in posting your comment. In fairness, five cases doesn't really prove anything, but the literature does not convince anyone that robotic prostatectomy results in better rates of potency.

I am concerned that bad surgeons think that the robot will make them better - it will not. As noted above it is only a tool. In the push to get physician credentialed I have seen many struggle for hours without significant patient benefit.

Well isn´t this a great Blog !I am delighted to see a Senior colleague pick up the battle ax and fight for scientific stringency and truth in this really important matter! Another great Senior colleague in the field of Urologic Surgery, Professor Urs Studer of Bern, Switzerland, has openly contested the "advantages" of robotic surgery and exposed the misadvantages. Please follow what he says in this webcast from the EAU-congress in Barcelona, 2010.

Well done! Just tweet on! I have some more links upcoming in the days coming, containing both thoughtful and sound criticism from serious and bona fide Senior Surgeons worldwide. Keep up the good work!

"Many urologists are quick to point out that these costs are irrelevant because most insurers do not provide increased reimbursement for RARP. Unfortunately, this misses the point. The costs have been absorbed by the entire health care system and are manifested by increasing costs of other hospital care. This point is driven home each day to the average American male as he views the ubiquitous hospital advertisements for robotic surgery or scrolls through the enthusiastic testimonies on the Internet."

And further in the final words of the Editorial:

"In the future, therapies that do not provide significant measurable benefit may not be reimbursed by private insurers or statefundedhealth care systems. Patients will then be asked to purchase these technologies directly. Only when individual patients are willing to pay the added expense of new innovations with their own money will we know if the robotis a ‘‘fake innovation’’ or the real deal."

Quote: "Overall, the cost of the robot-assisted surgery was $5,300 higher than the conventional approach although the reimbursement for each method is nearly equivalent. For that reason, the hospital lost an average $4,013 on each robot-assisted case, which was attributable to the robotic equipment and supplies".

Well anyhow, as long as it is a device that is "minimal-whatever", it NEVER can be wrong...Isn´t that so ?

Actually, a good example of how "minimal" equipment can be used in the wrong way. It is always the intent and the result that count, not the equipment. I have seen senior experienced Colleagues work wonders with just a "fork & knife" in really difficult situations versus recent Robotniks who have made a mess out of innocent patients and their lives...

Recent publication in AJOG from Colombia University, NY,(Sciavone et al) focusing on online information from 432 hospitals across the USA:

http://www.ajog.org/article/S0002-9378(12)00664-3/abstract

In the conclusion we read:

"Marketing of robotic gynecologic surgery is widespread. Much of the content is not based on high-quality data, fails to present alternative procedures, and relies on stock text and images."

(My comment: Anonymous):

Isn´t this going crazy, now instead of putting our efforts into the actual patients, daily clinical activity and into dearly needed research, we have to put our efforts into disproving an unproven technique, look for major flaws in marketing and fight everyday battles on priorities and medical funding with the Robotniks !?

"But insurers typically won’t pay more for a robotic surgery, or for the newest kind of MRI or CAT scan. So instead hospitals recoup their costs by charging insurance companies more for everything. And that contributes to $20 aspirin pills and the world’s highest health insurance costs".

Note also the commentary (no.5 from the top) by one Tom Emerick

"When the inevitable deep cuts in Medicare and Medicaid reimbursement come, the hospitals that wasted the most money on surgery gimmicks will suffer deeply. Many successors to today’s hospital executives will ask, “What were they thinking?”"

Dr Turner has after using the Robot since 2004, reached to following interesting remarks:

"Innovation should make things more cost-effective and safer while ensuring better results,” Turner concludes. “Therefore we must use only the most appropriate innovative technology and use it wisely. Moving into my second decade I hope to temper some of my enthusiasm with a bit of good old-fashioned fiscal responsibility. If the new technology isn’t lifting the quality of care, or lowering costs, why are we using it? Perhaps one patient in a thousand would benefit. But four patients might well be better off if they opted for a less aggressive, low-tech procedure.”

"A study showing that surgery for prostate cancer is unnecessary sends shares of Intuitive Surgical down another 8% today.Wall Street investors are taking another bite out of Intuitive Surgical (NSDQ:ISRG) today, sending its share price down nearly 8% on a study showing that prostate surgery is un-necessary for many men."

I had a classic TAH/BSO (and adhesion/cyst removal) in July. I had some complications, but nothing huge, and my doctor has been very responsive. Much as I hate the scar, it was done over a previous cyst surgery scar so at least it's not an all new scar.

I didn't know much about robotic hysterectomy, but started to learn about it from other women who've had hysterectomies. While most report that their surgeries went well and their recoveries were pretty fast, a few have had genuinely horrific complications, unlike anything I've heard of from women having a TAH. Worse, it seems like some doctors who perform robotic hysterectomy are more likely to blow off their patients.

It does make me rethink the whole idea of robotic surgeries, and it makes me less likely to want to have a robotic-assisted surgery in the future.

Skeptical Scalpel you are right! This is odd though because in a market place no one would pay twice as much for something that isn't twice as good. Maybe the fact that we have insurance companies paying for it has something to do with it. If people had to pay with their own money robots would never fly...

\, thanks for agreeing. As you can see from the comments above, there is some debate about how much insurance companies pay for the robotic surgery. I'm not exactly sure, but I think many hospitals use the robot as a loss leader and/or feel they must keep up in the medical "arms race."

Skeptical Scalpel--First off, thanks for your amazingly insightful post. I read through these comments and most of the links provided but I'm still hung up on one question: If robotic surgery is unquestionably more expensive than traditional lap surgery, how are some institutions (Florida Hospital) receiving higher reimbursements for da vinci hysterectomy? You're right, the mixed payer answer is complete bogus, but what is the answer? Are robotic surgeons selecting more complex cases for da vinci in order to get add-on codes? It just doesn't make sense. It's bad enough that hospitals are eating the costs, but even worse that insurance companies (and more likely the government) are paying more for a surgery with unproven patient benefits.

I cannot figure out how hospitals profit from buying robots other than the device is a loss leader. It's an unregulated arms race. If you have a robot, I'll get two.

Here's that link to an paper mentioned above about prostatectomy, written by a staunch advocate of robotic surgery (Dr. Davies), that says his hospital loses $4K on every robotic prostatectomy. http://www.ncbi.nlm.nih.gov/pubmed/22608294

In an upcoming invited Editorial in European Urology "Will the Future of Health Care Lead to the End of the Robotic Golden Years?" http://www.ncbi.nlm.nih.gov/pubmed/23116656(Stewart et al,Duke University Medical Center, Durham, NC, USA) we read following conclusive remarks:

"Our future reality may beheading toward an approach called dynamic pricing. In this economic model, there would be fixed reimbursements for disease states based on using the most effective technologyavailable. Use of less cost-effective modalities for treatment would result in lower reimbursements and/or penalties. In such a health care world, utilization of robotic technology will inevitably decrease until such procedures can be deemed cost effective. With health care as one of the factors attributable to our growing national debt, and its reformlooming on the horizon, the golden years of robotic technology may soon be ending".

Not questioning the DRG analysis, but isnt the DRG for prostatectomy 667? As evidenced by 2013 weights, we did see an 11% drop-off probably due to more patients going to watchful waiting and decline in PSA testing. Regarding the overall costs, yeah, the robot could be partially blamed, but arguably the fact that procedures are performed more successfully on sicker patients is partially offsetting the increased cost argument. Afterall, there is a difference in weight growth for DRGs w/CC/MCC. So the thinking goes, if surgery is quicker and more successfully done on sicker patients that results in shorter stays for them, does it make a robot a useful for society instrument albeit at a higher cost? Any thoughts would be appreciated.

You guys are all blaming the robot for the increase in reimbursement rates. But it seems like "the system" is the real problem.

The problem is not that the robotic surgeons are driving up rates. The problem is the standard lap surgeons don't try to undercut robotic lapro on price. They take the same reimbursement even though you all say that they can do it for much less? Why is this? If the cost for standard lapro is really 1/2 of the robotic, why are they not offering to do the procedure for 1/2 of the standard reimbursement? What am I not getting here?

If standard lapro is really cheaper, why not pass that reduced cost onto the insurer and the patient? You know, the ones making the choices? Then they might have a reason to not choose robotic. As it is now, the patient's got a real easy choice. If a Cadillac and a Yugo are the same price, you take the Cadillac.

t s, I wrote this blog 13 months ago. I am not sure what I wrote is still valid. I am told that many third party payers are not compensating hospitals or surgeons for the extra costs associated with robotic surgery.

It may be that the paper I quoted in the blog was incorrect about what is being reimbursed for robotic surgery. I simply do not have the data.

I think most hospitals are absorbing the extra costs. As far as I know, there is no CPT billing code for robotic surgery so surgeons are not being paid more to do robotic surgery either.

Right, but the question is why do they have the same billing code if one is so much cheaper? If lapro is cheaper to perform, why aren't non-robotic surgeons pushing for a different billing code with a lower reimbursement? You think they'd get grief from the insurers if they took less money?

I don't see why everyone is whining about robotic surgery being more expensive if hospitals are supposedly eating the extra costs. And I guarantee that robotic hospitals are making money performing robotic surgery. You don't buy 3, 4, or even 5 robots because some sales guy talked you into it while your bean counters were looking the other way.

If robotic hospitals are eating those extra costs, then that apparently means that non-robotic hospitals are eating the extra profits? Looks like no one in the health care industry is really interested in reducing overall costs. They are more interested in gaming the system to milk all the money they can.

If we had real price competition, then we might actually see which method is the most cost efficient. This is why I blame our current payment paradigm for the cost escalations.